Union Budget 2020: Expectations from the Mutual funds sector

By Prateek Mehta

As the country starts building up expectations from the last budget before the election year, as a platform dedicated towards helping a million Indian families retire with confidence, I have 3 key items in my wish list.

Encourage long term investing: Long term Capital gains tax on equity instruments: Direct investments in equity or via mutual funds are taxable if the gains are more than 1 Lakh. However, equity investments in insurance instruments are not taxed. This anomaly needs to be resolved. Ideally, to encourage financial savings in a country like India, this tax should be done away with. Possibly, look at increasing the 80(c) limits to 2.5 Lakhs. The country per capita income has moved significantly since the limit was raised last time. Also, increase short term capital gains tax on equity investments – This will deter speculation and encourage long term investing.

80(c) deduction on Debt - DLSS - While we have seen a lot of inflow into ELSS and equity-linked funds in general, providing a tax break into a 'Debt Linked Saving Scheme' would be great. Indians are inherently conservative investors and this gives a meaningful option to get returns better than all fixed income instruments. By introducing a lock-in of 3 years, the fund manager would also be able to eliminate interest rate risks if they want to do the same. This would put the debt funds at par with debt-based ULIPs.

Confidence in Indian economy: slowdown is being felt in some of the sectors, steps to drive demand and more importantly, consumer confidence would really help.

(Prateek Mehta is Chief Business officer at Scripbox)